R&D Intensity and Regional Growth: Does a Link Really Exist?

Economic growth in a regional economy can be positively linked to an increase in intensity of industry R&D, according to recent research by Marios Zachariadis of Louisiana State University. R&D, Innovation, and Technological Progress: A Test of the Schumpeterian Framework without Scale Effects, released in September 2002, establishes a connection among R&D intensity, patenting, technological change and economic growth.

Zachariadis uses 2-digit SIC code industry data from U.S. manufacturing between 1963-1988. Defining R&D intensity as the fraction of output that is devoted to R&D expenditures, the research supports the position for a growth model in which policy decisions can have a positive impact on economic growth. Zachariadis’ work also supports a direct and indirect relationship between R&D intensity and productivity growth.

The author establishes several relationships: (1) R&D intensity has a positive impact on the rate of patenting, (2) the rate of patenting has a positive impact on the rate of technological change, and (3) technological change has a positive impact on the growth of output per worker in a regional economy.

Zachariadis suggests that technological spillovers are present among industries, because the positive impact, when including all industry R&D, is greater than individual industry impact. An increase in aggregate industry R&D intensity by 1 percentage point increases the growth rate of output by 0.66 percentage points. This stronger positive impact indicates that industries are benefiting from spillovers amongst each other and not just within each industry.

Findings of this nature have logical implications in economic development policy. Policy makers may conclude from this research that efforts to increase the role of R&D in an economy will have a significant economic impact. R&D intensity is positively linked to increased productivity, which is key to economic growth.

R&D, Innovation, and Technological Progress is available at: http://www.bus.lsu.edu/economics/papers/pap02_18.pdf

Copyright State Science & Technology Institute 2002. Information in this issue of SSTI Weekly Digest was prepared under a cooperative agreement with the U.S. Department of Commerce, Economic Development Administration. Redistribution to all others interested in tech-based economic development is strongly encouraged — please cite the State Science & Technology Institute whenever portions are reproduced or redirected. Any opinions expressed in the Digest do not necessarily reflect the official position of the U.S. Department of Commerce.